TFM Daily Market Update 04-06-2022


The feeder cattle market has been affected by the strength in the grain markets. As the corn market has posted its strong rally through the late winter and spring months, the opposite trade has been selling feeder cattle. This is typical because the perception is that feeder cattle demand will be limited by the high cost of feed grains to finish those cattle in feedlots. Since the contract high, established in February, Apr feeder cattle have lost nearly $20.00 in value to the lows of Tuesday. Despite the nearby negative tone, Feeder Cattle are still trending higher overall on longer-term charts. Current prices are challenging support underneath that market, but longer-term optimism is still in play. Cattle numbers are still tight, and high feed costs and difficult pasture conditions in the southern plains still limit any possible expansion of the cow herd. Prices may have drifted into value territory, but it may take some cooling in the grain markets for the money flow to return to the feeder market.

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CORN HIGHLIGHTS: Corn futures traded mixed on the overnight and tried, on occasion, to rally but by day’s end finished with small losses. May gave up 3-1/4 cents and Jul lost 1-1/4 to end the session at 7.47. Dec lost 1-3/4 to close at 7.04-3/4. It appeared today was more of a non-news day with a “risk-off” type attitude. Crude oil traded weaker by 1.00 to 3.00 and the Dow Jones stock market index was down over 300 points.

On Friday, the USDA will release the next WASDE report. There have been a lot of questions asking if the Ukraine/Russia war will be reflected in world numbers. Our best guess is yes, since a month has now passed from the start of the war and the last USDA report. Expect fewer exports out of Ukraine. Will there be changes to expected production? Our best guess here, as well, is yes. Regardless of what the report indicates, this is an unfolding event with the reality that it is anything but “business as usual” this year with the outcome for shipping old crop corn, growing, harvesting, and shipping new crop very much unknown.

SOYBEAN HIGHLIGHTS: Soybean futures traded both sides of steady for most of the session, yet weakened into the close closer to lower. Jul lost 10-12 cents to end the session at 16.03-1/2 and Nov gave up 11-3/4 closing at 14.44. An announced export sale of just under 5.0 mb for 2021/2022 delivery to China failed to add a spark to prices today which had finished firmer the previous two sessions.

Many are anticipating that China will be in the market for more soybeans now that they are back from a two-day holiday. Today’s number was encouraging, at the same time may have been a disappointment that it wasn’t larger. We are not going to read too much into any one day. Export sales continue to occur and prices, while they have set back from a negative USDA report, are also providing a better buy opportunity for end users. The Ukraine situation continues to suggest little export activity of sunflower oil in the weeks or months ahead and the planting season is one big question mark. Bottom line, soybean prices are well supported and despite expectations for more acres, weather will have more impact on price direction in the months ahead than will acres. In fact, the ratio of Nov soybean futures price divided by Dec corn futures price is currently at 2.05, favoring corn acres.

WHEAT HIGHLIGHTS: Wheat futures closed mixed. Chi front months settled lower but Dec onward gained in price. KC settlements were positive but MPLS were lower. There wasn’t much fresh news to push the market in either direction. May Chi lost 7 cents, closing at 10.38-1/4, and Jul down 4-3/4 at 10.40-3/4. May KC gained 2-1/4 cents, closing at 10.85, and Jul up 1-3/4 at 10.86. May MPLS was down 3 cents, closing at 11.08-3/4, and Jul down 3-1/4 at 11.08-1/2.

After a two-sided trade, the wheat market couldn’t seem to make up its mind. The mix of red and green might make one think they are looking at a Christmas tree rather than a quote sheet. Bear spreading was noted with selling pressure in the front months and buying in deferred contracts. This may be indicative of supply concerns down the road. As for the here and now, the war continues to rage on in Ukraine. There is increasing concern about Russian troops gathering in eastern Ukraine and heading south towards export points. Today the U.S. and EU issued new sanctions on Russia, apparently targeting Putin’s daughters from a financial angle. So far sanctions have not seemed to be effective in changing Putin’s stance. U.S. wheat exports have been poor, despite the war and anticipation of demand shifting our way. India, Australia, and Europe have picked up the slack so far, but if the war continues for some time to come, both Canada and the U.S. could see a pickup in export demand. As far as weather is concerned, the recent European model’s forecast suggests dryness in the western Corn Belt and the Plains, June through August. Additionally, the Climate Prediction Center suggests that drought in the HRW wheat region will continue at least through June.

CATTLE HIGHLIGHTS: Cattle futures turned higher on Wednesday, ending a 5-day selling streak, as contracts saw some value buying and grain markets softened. Apr live cattle gained 0.900 to 137.700, and Jun was 0.900 higher to 134.225. For feeders, May gained 0.950 to 159.950.

One day doesn’t make a market turn, but the price action was more friendly on Wednesday, as prices shook off early selling pressure, and posted bullish hook reversals to the upside on the close. Follow through tomorrow will be key, and that may be more directed by the action in grain markets. Further recovery could have Jun futures looking to test resistance up to $135.300 and the 200-day moving average, a key barrier. The cash market has stayed light this week, with little business on Wednesday. So far on the week, the market has marked most trade at $138 and $22 dress trade, fully steady with last week. Today’s slaughter totaled 125,000 head, even with last week, but 5,000 greater than a year ago. This heavier slaughter pace is keeping pressure on the market in general. Boxed beef values have been trading firmer but were mixed at midday with Choice gaining 0.10 to 271.63, and Select 1.78 lower to 261.12 on movement of 93 loads. Retailers may be looking to step into the market to secure beef supplies with May and the start of grilling season around the corner. The USDA will release weekly export sales tomorrow morning before the market open, and another strong week could help support prices. Like live cattle, the feeder market is trying to turn the corner higher, supported by the weaker grain markets on Wednesday. After May feeders have dropped $10 in the last six trading sessions, a positive turn higher could bring some additional short covering going into the end of the week. The action of grain markets going into Friday’s USDA Supply & Demand report will likely be the key. The markets are trying to put in a turn, but one day doesn’t signal the bottom. Charts are still weak overall, but improved price action was seen on Wednesday. The cattle market is starting to look like a value, and that may have triggered some buying on Wednesday.

LEAN HOG HIGHLIGHTS: Hog futures ended the aggressive selling streak on Wednesday, posting moderate gains as the cash market tried to find footing on Tuesday afternoon, and the recent selling spree made hog futures a value. Apr hogs gained 1.075 closing at 98.750, and Jun hogs added 0.350 to 114.700.

After a 6-day losing streak, hog futures found some buying support, but price action was more consolidative in nature than a price correction. Despite the positive gains, trade occurred within the trading range on Tuesday. Jun hogs challenged but stayed below the 50-day moving average and that keeps the door open for a test of the 100-day and trendline support as low at $104. The cash market has helped trigger and did see firmer afternoon trade, but gave that value back at midday trade. National Direct midday values were 1.58 lower at 99.38, and the 5-day average is at 100.41. The Lean Hog Index was lower, losing 0.75 to 101.66. The Apr contract expires on the 14th, so the hog market may be looking at the premium of the deferred futures, which is still a concerning wide stance. Pork carcass values were firmer at midday, gaining 3.02 to 106.62. Load count was improved at a moderate at 194 loads. Weekly export sales will be released on Thursday morning before the market open, and those numbers could help dictate the price action on Thursday. Wednesday was a price consolidation day as hogs are searching for a low, but the technical picture is still weak, and prices are trending lower.

DAIRY HIGHLIGHTS: For the second day in a row, Class III milk futures jumped steadily higher and closed back up near contract highs. For now, buyers are showing a strong amount of support of current levels after some heavy selling pressure took the market off of highs recently. Buyers pushed the second month May contract up 41c yesterday and tacked on another 45c on Wednesday. Buying demand today likely stemmed from the fact that block cheese added 4.75c while barrel cheese added 4c. This pushes both block and barrel cheese back over the $2.30/lb mark. The whey trade also saw buying interest for the first time in a couple weeks, as it added 2.75c and closed up at $0.6175/lb. Before today’s bidding and yesterday’s neutral whey session, whey had fallen eight days in a row prior. The Class IV products were mixed today with powder down 2.50c and butter up 0.75c. The spot butter market has been bid higher each day this month.

Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency. A customer may have relationships with all three companies. TFM Market Updates is a service of Stewart-Peterson Inc. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.


Brandon Doherty

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